A recent study, Avoiding the Alignment Trap in Information Technology, argues the importance of addressing IT effectiveness before attempting to align IT with organizational goals. Written by Bain & Company advisors and published in MIT Sloan Management Review, the article notes that only 7% of companies studied rated themselves highly in both alignment and IT effectiveness, and those that did reported compound growth rates 35% higher than average for companies studied.
At the same time, almost three-quarters of the respondents felt that their IT operations were neither efficient nor aligned with company goals. Perhaps most significantly, of the remainder, those that were aligned but not effective had significantly higher costs and lower growth rates than those that had achieved neither goal. The authors refer to this as “the alignment trap.” Clearly, alignment is a worthwhile goal, but only if IT effectiveness can be achieved first.
Benefits of Effective IT
Improving the efficiency and effectiveness of IT poses a significant challenge to any organization, but the benefits — long-term cost reductions, improved information access, elimination of redundancy and, ultimately, the ability to align IT operations with overall corporate goals — justify the necessary investment of time, effort and money. In short, restructuring IT can turn it from an expensive necessity to a powerful competitive tool.
A well-tuned IT operation aligned with the organization’s goals can help improve decision making, speed development of new products and services, and reduce capital and operating costs. At the same time, it can help address today’s most pressing business demands including:
How We Got Here
The vast majority of IT systems have reached their present states not by design but by haphazard evolution. New hardware and software components sit next to legacy systems. Applications are chosen to meet the limited needs of specific groups with little or no consideration of fit with other operations or systems. Hardware choices often are based on compatibility with existing systems rather than efficiency or cost, or are based solely on cost regardless of practicality.
Too often these practices result in a vicious cycle, in which existing business practices control IT decisions and then IT’s limitations determine future business practices. As a result, incompatible systems proliferate, hardware is underutilized, software applications are duplicated, communication becomes difficult or impossible, the same data may be stored over and over throughout the organization, and IT fails to keep up with user demands.
Strategies for Strengthening IT
Getting IT back on track begins with a strategic decision to become proactive rather than reactive. It does not require wholesale replacement of existing systems, but rather a change in direction, addressing both the implementation of new systems and the redirection of existing ones. Strategies for rationalizing IT operations fall into four categories: the “four R’s.” These are: Reduce, Reuse, Redeploy and Reinvent.
Reduce
Careless oversight of growth can lead to duplication of systems and software across the organization. But even the most careful IT group can find itself dealing with redundancy as a result of merger or acquisition; so it is no surprise that many, perhaps most, organizations have redundant applications that could be combined. This can be a painstaking process, but it pays recurring dividends by reducing the ongoing costs of hosting, support and training.
Today’s wide area networks (WANs) enable data center consolidation, permitting applications to be hosted centrally and accessed across the organization. The efficiency of the WAN itself can be maximized using techniques such as de-duplication and caching to eliminate transferring unnecessary copies of data and to store frequently accessed data locally and thereby reduce traffic on the network. Where multiple data centers remain, they can be configured for mutual disaster recovery, eliminating the need for expensive dedicated DR sites.
One of the most powerful tools of a reduction strategy is virtualization, which comes in many forms (See Figure 1).
Virtualization can reduce cost, eliminate hardware underutilization, simplify data management for both IT staff and users, and increase overall system reliability. Virtualization simplifies test-environment management and can improve production deployment procedures. Advanced features such as VMotion allow on-the-fly migration of applications between physical servers without interrupting operations, and LiquidVM provides a Java virtual machine without the cost or overhead of a full operating system.
At the same time, virtualization increases certain demands on IT. If virtual servers that were formerly hosted in separate firewalled network zones are co-hosted in the same virtual infrastructure, security can be compromised. IT may choose to segregate some virtual environments for security. Also, ease of virtual server creation can lead to “virtual server sprawl,” the excessive creation of virtual servers, or lead to license violations and increasing overhead of tracking and management. A well-planned infrastructure and clear, well-communicated, enforced policies will simplify management of the virtualized environment and allow you to maximize the benefits of virtualization.
Reuse
Instead of installing hardware and software for every identified need, you can cut costs and reduce complexity by sharing capabilities, either internally or externally. Switching from internally hosted software to software-as-a-service (SaaS) can, when appropriate, be like giving up your car and taking the train. Like other “shared ride” services, it reduces cost of ownership and the responsibilities of maintenance. It eliminates redundancy, increases flexibility, and allows both IT and the company as a whole to focus on core competencies, where strategic advantages can be realized and returns on investment maximized. Because it doesn’t attempt to “align” every software installation precisely with individual user expectations, SaaS requires some discipline. But all successful business strategies require discipline, and the savings in time, money and long-term efficiency can more than justify the effort.
Another way to reuse resources is Services Oriented Architecture (SOA), which redesigns IT infrastructure so that applications can exchange data to serve specific business needs. Existing software functions are provided as individual units that can be distributed over the network and combined as needed. In the process, pieces of existing applications become open-ended so they can be recombined to create new composite applications (See Figure 2).
For example, credit checking and payment history can be combined into a service to facilitate new leasing credit and approval decisions. Billing and shipping systems can be combined and made available over the Web to provide customer self-service for account inquiries.
Of course, along with benefits, SOA brings some increased responsibilities. Because transactions take place across multiple systems, IT management must closely manage software updates to ensure integrity of the overall operation. While this does require some oversight, SOA can provide enormous benefits including reduced complexity of IT operations, increased functionality for the entire organization and reduced demands on IT staff.
Redeploy
Properly implemented, reuse and reduction strategies will free up equipment and staff time, both valuable assets. Up-to-date hardware can be reassigned to new projects, reducing new equipment acquisition costs. Similarly, older machines can be redeployed as test servers. (That said, pay attention to power consumption on older hardware; it may be more cost effective to simply retire servers that are incorrigible power-hogs.)
The larger benefit may come from freeing skilled IT staff from manual tasks like installing operating systems and building servers. Instead, they can address future-facing projects like developing APIs to support the new service oriented architecture, enhancing system security, increasing availability, monitoring and enhancing performance, and driving new innovations. In short, they can move from the typical reactive mode to a proactive one. In this way, they position IT to finally begin aligning with business goals.
Reinvent
In a proactive mode, IT can become a strategic asset for the organization, implementing, leading and even initiating projects that are aligned with the organization’s current and future needs. IT can support competitive initiatives like global expansion and workforce mobility, and create new processes and redesign existing ones to better meet organizational needs. Newer so-called “Web 2.0” technologies can be brought to bear to further enable alignment, not just between business and IT, but between business units. Entirely new business lines and initiatives can be staffed.
Only by focusing first on operational effectiveness and building efficient, aligned IT functions, however, can an organization achieve these competitive and financial benefits necessary to drive growth in the coming decade.
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